Reports on Insurers Demanded

Lawmakers demanded Monday that Insurance Commissioner Chuck Quackenbush appear at an April 26 hearing and produce confidential reports his office prepared on the handling of Northridge earthquake claims by six major insurance companies.

In a hand-delivered letter to Quackenbush, Assembly Insurance Commission Chairman Jack Scott (D-Altadena) said he is opening an inquiry into the commissioner’s enforcement practices, particularly as they relate to companies that had large numbers of claims stemming from the 1994 Northridge earthquake.

He wrote Quackenbush that he wanted “to assess the adequacy of Department of Insurance enforcement policies in disciplining violators and protecting consumers.”

He asked for reports on Allstate Insurance Co., Farmers Home Group, Farmers Insurance Group, Fireman’s Fund Insurance Co., State Farm Insurance Companies and 21st Century Insurance Co.

Scott’s decision to open the inquiry followed disclosures that Quackenbush accepted a $50,000 contribution from Allstate six months after the commissioner decided not to fine the company for its practices in handling earthquake claims. Instead, he ordered Allstate to contribute $2 million to a nonprofit educational foundation.

Consumer advocates complain that if he had uncovered wrongdoing, he should have fined the company and made the reports public. They argue that nowhere in state law is the commissioner authorized to allow contributions to foundations in lieu of fines.

State campaign finance records show that Allstate was one of several insurance companies that made generous donations to the commissioner in the last six months of 1999. Records also show that he used $100,000 of the money to repay his wife for personal loans she made to her unsuccessful 1998 state Senate campaign.

One of the consumer groups, the Santa Monica-based Foundation for Taxpayer and Consumer Rights, joined Scott in pushing for public disclosure of the earthquake reports.

The group argued in a formal public records request that the reports should be open to scrutiny so it can be determined whether Quackenbush should have taken stronger action.

“These reports are the only things that can exonerate him,” said Harvey Rosenfield, the foundation’s director, “or conversely, can tell us if he was derelict in his duty.”

After numerous complaints from policyholders, the Department of Insurance randomly selected a large sample of the claims handled by each of the six companies.

The results of the survey were compiled into a Market Conduct Examination Report, which became the basis of settlement talks between the department and the companies.

The six companies were ultimately directed to make contributions to a foundation created to educate the public on earthquake safety and preparedness. Policyholders, who felt that their claims had not been handled adequately, also could seek reimbursement from the foundation.

State Farm and Allstate were each directed to pay $2 million to the foundation, called the California Research and Assistance Fund. Farmer’s Insurance Group was required to make a $1-million donation, Firemen’s Fund $550,000 and Farmer’s Home $100,000.

Hardest hit by the requirements was the Woodland Hills-based 21st Century, formerly known as 20th Century Insurance, which was fined $100,000 and directed to pay $6 million to a foundation.

Deputy Insurance Commissioner Dan Edwards said Quackenbush considered the contributions to the foundation to be the same as a fine but he declined to say what wrongdoing by the companies had required such a penalty.